Pension costs fueling debate
Just as President Bush has tried to do with Social Security, Gov. Schwarzenegger and his political allies have manufactured a "crisis" in our public employee pension system. Bush's solution: privatization. Schwarzenegger's solution: Change from a secure defined benefit pension plan to a riskier 401(k) plan pretty much the same thing.
I'll leave the Social Security debate to others. Instead, I want to explode a few myths and distortions about public pensions. Public employees are not growing rich on undeserved pension benefits. The governor and his allies are fond of describing the "typical" public employee who retires at age 50 with an $80,000-a-year pension. For every one of them, I can find you a dozen others who have worked for state government for 30 years and receive less than $15,000 a year. In fact, the average pension benefit paid by CalPERS is only about $20,000 a year for someone with nearly 20 years of service. No one is growing rich on that, especially since many public employees are not eligible for Social Security.
Public sector workers do not make more than their counterparts in the private sector who do comparable work. (For example, according to the governor's Department of Personnel Administration, registered nurses in state service earn some 26 percent less than RNs in private health care.) People who choose public service sacrifice earning power. In return, government provides them with decent benefits and retirement security. Schwarzenegger has proposed to break that promise and take away that security. Will he offer higher pay in return? Somehow, I doubt it.
Defined benefit pension plans are not unique to public employees or to California. Eighty-three of the companies in the Fortune 100 the top corporations in America have defined benefit plans; many of them use their pension plans as powerful recruiting tools. And the state of Nebraska recently switched back to a defined benefit plan because of dissatisfaction with its 401(k) plan.
Current shortfalls in some municipal pension funds are not the result of bloated pensions. They are due to the precipitous drop in the stock market in 2000-2001 that affected even giant pension fund managers like CalPERS. Yet the governor and his friends now want to shift all the stock market risk from fund managers to employees.
Defined contribution plans are not cheaper to administer. According to CalPERS, it costs 18 cents per $100 invested to administer a defined benefit plan. At the same time, it can cost up to $1.35 per $100 or nearly eight times as much to administer a 401k-type plan. Studies have found that Schwarzenegger's proposal would not result in any net savings to state and local governments for at least a decade.
Changing the public employee pension plan will not solve the state's budget problems. Proposals to change the pension system in future years would have no impact at all on the current budget deficit. Also, since individual retirement investments will be at the mercy of the stock market, the state may well wind up paying more in public assistance to retirees who "outlive" their public pensions.
Finally, weakening the public pension system will certainly not help the state attract "the best and the brightest" to public service, which is one of the key recommendations in the governor's own California Performance Review.
It is time to stop scapegoating government and public service. It seems that government is the only industry in which the CEOs (politicians) go out of their way to bad-mouth their work force.
Public employees want to be partners in helping our state and our communities do the best possible job in meeting the needs of the people of California. We are people who chose public service as a career. We not only are motivated to improve public service, we also have the knowledge and expertise to make it happen. We're not the problem and we can be part of the solution.
Unfortunately, rather than working with us, the governor has reportedly adopted a political strategy to create "a phenomenon of anger" among voters toward public employees. Former Gov. Pete Wilson tried the same strategy. He failed. Schwarzenegger should learn from that example.
J.J. Jelincic is president of the California State Employees Association.
